The cost of tuition for higher education has skyrocketed in recent years. Previously students could attend private and public colleges without building debt. However, with the rapidly rising price of education today, it has become almost a certainty that college graduates will be left with significant tuition debt upon receiving their degree. With the current yearly cost of a 4-year institution ringing in at about $34,000 for private schools and $17,000 for public institutions, not including living expenses and housing, it is becoming increasingly difficult to pay for higher education without financing. Currently, about two-thirds of bachelor degree recipients had to take out loans to attend school, either through the government or privately.
The problem lies not in the loans themselves, but in the difficulty in paying them off after graduating in our current job market. It has been estimated that there are about 37 million student loan borrowers in the United States. Together, their loans add up to over $1 trillion dollars and have exceeded mortgage based debt in this country. That being said, the lack of jobs for recent graduates, coupled with the massive tuition debt, is a similar set up to what recently occurred with the housing market. In many instances, college graduates have massive debt and their income is not enough to match the payments. This is potentially setting up the country to see a massive tuition loan default in the near future.
Currently, 48% of 25-34 year olds say that they are underemployed or unemployed. Considering that a significant portion of those 37 million student borrowers would fall within that specific group, a real problem is surfacing. As it stands now, about 41% of borrowers become delinquent within the first five years, and that percentage is poised to go up. As the majority of high school graduates go to college and tuition rises create an even greater need to take out loans, widespread defaults may occur. What is needed today is a way to insure against those loan defaults; to help graduates who do not find a job immediately after graduation (or one that matches their potential) from defaulting on their loans when their loan payments are due, considering grace periods built in to some loans.
Accordingly, there is a need for a system and process that addresses the needs of graduates and the loan issues they face.